On Sunday evening 8 August at 6:00pm New York time, as the trading of gold futures contracts commenced for the week and the COMEX GCZ1 December 100 oz gold futures contract</a> opened at $1765 per ounce, there was nothing in the market or in wider macro news to suggest that the gold price was about to witness a sudden drop of $87 or 5% to a low of $1677.9, or that 90% of that drop would be in a 12 minute period between 6:45 pm and 6:57 pm when the gold price fell by 4.93% on huge contract trading volume. From a macro perspective, nothing had changed over the weekend, and all news that could arguably have affected the gold price, such as market unease about the US Fed moving to taper QE and asset purchases, was already reflected in the price. Waterfall drop in COMEX gold futures, Sunday evening New York time, August 8
On the previous Friday, August 5, the gold price on COMEX had wrapped up the afternoon at $1763.5 after meandering tightly in the $1760 – $1765 range for the previous 7 hours. Earlier on Friday morning had seen ‘higher than expected’ US non-farm payroll data for July, with the narrative wheeled out to those naïve enough to believe it that this could trigger ‘early’ Fed tapering and higher interest rates. Spoiler – The Fed can’t taper. Despite this fact, the US jobs data was put into the trading desk mix as the US dollar rallied and US bond yields spiked higher, and the COMEX gold price fell sharply Friday morning from $1801.8 at 8:30 am, to $1764.6 by 10:00 am. Before looking at the Sunday evening orchestrated plunge, the key point to remember is that the Friday morning data and how it was digested, was already embodied and reflected in the gold price by 10am on 5 August, and there was no volatile price action in the COMEX gold price over the next 7 hours up to 5pm Friday afternoon New York time (when trading halts for the weekend). Thinly Traded – Timing the Attack As everyone knows, Sunday evening opening hours in COMEX trading New York time (corresponding to Monday morning Asian hours), is a time of thin trading and illiquid markets relative to the Monday to Friday New York mornings when the ‘main event’ of precious metals trading takes place. Additionally, it is currently August, and due to holidays and vacations, far less market participants than normal are at their desks, and furthermore, two of Asia’s main gold trading hubs were on holiday. Singapore had a national holiday on 9 August for Independence Day. Japan had a national holiday on 9 August observing Mountain Day. So would Sunday evening 8 August New York time be a good time to sell thousands and thousands of front month gold futures contracts over a few minute period if the sellers were rational profit maximizing traders. Of course it would not. Which is precisely why said sellers of thousands and thousands of December 2021 gold futures contracts decided to execute their trades on an August Sunday evening (Monday morning Asia time) during thinly traded hours when New York and London were closed, and where two of Asia’s largest financial centres, Singapore and Tokyo, were on holiday. Because the sellers of these gold futures contracts had only one motive, and that was to bomb the gold futures price and trigger stops and further selling by other contract holders, simultaneously torpedoing the international spot price and achieving the desired effect of negative gold headlines around the world, but above all else attempting to disarm the gold price as the barometer of inflation expectations, and strangle the gold price as the ‘canary in the coal mine’.
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